Harper’s agenda is all about trade, but can he close the deal?

Prime Minister Stephen Harper departs Ottawa on Thursday to take part in a bilateral visit in Malaysia prior to attending the APEC Leaders' Meeting in Bali, Indonesia.

Photograph by: THE CANADIAN PRESS/Sean Kilpatrick
, Postmedia News

OTTAWA — Expanding Canada’s trade markets is expected to be a pillar of the Harper government’s Oct. 16 throne speech, but some feel the Conservatives have earned a reputation as great talkers and poor finishers on big free-trade files.

Why should Canadians care?

Amid a still-sluggish economy, jobs and economic growth are a key focus for all federal political parties.

The Conservative government says “trade is the new stimulus” and is the best way to spur the economy, create jobs and improve lagging productivity and competitiveness — without sinking public finances deeper into deficit.

Canadian companies that find new international customers for their products can expand their businesses, hire new employees and grow the national economy, the government argues.

Also, trade agreements like the Canada-EU pact would eliminate tariffs and reduce prices on products coming into Canada, such as automobiles, clothes, housewares and other items, saving consumers money.

Critics argue, however, that trade deals like the EU agreement could hurt small Canadian companies, threaten jobs in some industries and erode sovereignty of municipalities across the country to make their own decisions.

Which trade deals have been completed? Which ones are on the go?

Since taking office in 2006, most of the free-trade deals the Conservative government has completed have been with smaller economic players, including: Panama, Jordan, Colombia, Honduras, Peru and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland).

Canada is also pursuing trade agreements with more than 50 countries, including established and emerging markets such as the EU, Trans-Pacific Partnership, India and Japan.

The Harper government has invested significant political capital in the Comprehensive Economic and Trade Agreement with the EU, but a deal is already long overdue. Prime Minister Stephen Harper initially promised negotiations would be completed by the end of 2012.

The TPP — which currently includes Canada, the United States, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam — represents a market of 792 million people and combined GDP of $27.5 trillion, or nearly 40 per cent of the global economy. Some political leaders in the TPP, including U.S. President Barack Obama, hope to conclude negotiations this year, although many trade specialists believe that may be too ambitious.

Bilateral negotiations with Japan are still very much in the early stages, while the Canada-Korea talks were launched more than eight years ago. Negotiations with Singapore (now a member of the TPP with Canada) started in 2001 and have been officially on hold since 2009.

Explore all of Canada’s trade deals here:

What’s the holdup?

Spending cuts and a lack of political will to make difficult decisions on sensitive sectors of the Canadian economy are holding up several deals, say trade observers and even federal bureaucrats. A recent internal government review by officials in the Department of Foreign Affairs, Trade and Development identified budget cuts and hiring freezes as affecting Canada’s ability to successfully negotiate trade deals.

The federal officials also cited questions about the government’s readiness “to make difficult decisions regarding sensitive trade policy issues” as an obstacle.

While the report highlighted some cuts at the Trade Policy and Negotiations Branch, officials in International Trade Minister Ed Fast’s office insist there are sufficient resources.

The Trade Policy and Negotiations Branch has an annual budget of about $42 million and has seen its spending increase by 40 per cent since 2007, note federal officials.

“We have dedicated the resources necessary to see these endeavours succeed,” Rudy Husny, the minister’s press secretary, said in an email.

On the Canada-EU trade talks, the key sticking points appear to be Canadian beef access into Europe; Quebec’s worries about greater EU access to its supply-managed cheese and dairy industry; and Newfoundland and Labrador’s requirements that fish caught in the province be processed there.

Other items, sources say, include intellectual property protection on pharmaceuticals — which could drive up drug costs for provincial governments — as well as market access into Europe for Canadian automobile manufacturers, government procurement, and financial services and investment protection.

How is Canada faring globally?

Data released by the Bank of Canada show the country’s share of world exports has been in decline for more than a decade, having fallen to about 2.5 per cent today from 4.5 per cent in 2000.

The high-flying loonie has been a challenge for manufacturers and exporters, whose products are more expensive for buyers in the U.S. and elsewhere.

Part of Canada’s decline in global trade can be attributed to China’s rise in the global economy, “but even allowing for this, Canada has fared poorly,” Bank of Canada senior deputy governor Tiff Macklem said in a recent speech.

“Our loss of global trade share has been the second largest in the G20,” he said.

Emerging markets account for 80 per cent of global growth, but only 12 per cent of Canada’s exports go directly to fast-growing emerging markets, with 85 per cent going to slow-growing advanced economies, says the central bank.

Energy has become a critical component of Canadian trade, accounting for almost 20 per cent of exports — nearly double the 11-per-cent share in 2000 — while at the same time manufacturing has suffered.

Canada continues to grapple with a large trade deficit — meaning the value of the country’s imports are exceeding that of its exports — due to the high Canadian dollar, soft global demand and companies struggling to access new markets.

Recent data from Statistics Canada show the country’s trade deficit in July more than doubled to $931 million from June. It was the 19th consecutive monthly trade deficit.

What’s the reaction from business groups, concerned citizens and Canadian communities?

Business groups are generally big supporters of the Conservative government’s free-trade agenda.

Earlier this year, the Canadian Chamber of Commerce, Canadian Council of Chief Executives, Canadian Federation of Independent Business, Canadian Manufacturers & Exporters and other groups threw their “full support” behind the government to finalize “a balanced agreement.”

However, some of these groups are increasingly frustrated by delays on both sides of the Atlantic in closing what would be Canada’s largest trade deal.

The Canadian Chamber of Commerce has urged Harper to “fish or cut bait” on the Canada-EU talks.

Canadian Council of Chief Executives president John Manley, in a recent letter to Harper, said a failure to finalize a Canada-EU deal soon would hurt Canada’s chances at concluding other negotiations, including the Trans-Pacific Partnership.

“The credibility of our country’s trade agenda, a cornerstone of your government’s strategy for jobs and growth, is at stake,” Manley said.

However, a large number of Canadian communities — backed by the Council of Canadians, a concerned citizens’ group — have raised objections.

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